Australia’s biggest banks are split on whether it should be easier to get a home loan, amid warnings that changes to lending regulations could send more borrowers into financial strife.
Prospective home owners would have more buying power if rules restricting access to mortgages were more flexible, NAB and the peak banking body say.
The financial regulator, APRA, requires borrowers to show they can afford a 3 per cent interest rate rise as a buffer against monetary policy shocks or a drop in earnings.
While it was an important mechanism to protect the financial system, modest changes to the buffer for first home buyers would help boost their borrowing power, NAB executive Andy Kerr told a parliamentary inquiry examining the financial system’s impact on home ownership.
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“It’s important that all options are on the table right now so we can meaningfully improve access to credit for Australians in a responsible way,” he said today.
From NAB’s experience, first homebuyers were no more risky than other borrowers, Kerr said.
But Commonwealth Bank, the nation’s biggest lender, and Westpac said there was no reason to change the existing restrictions.
“We don’t think the right answer is to put customers into more debt,” Westpac manager Martin Green said.
Based on his bank’s data, first homebuyers were a higher risk, CBA executive Angus Sullivan said.
As a result, the levels of capital available for first home buyers should reflect their underlying risk to protect them from taking on unmanageable debt, he said.
The consequences of easing financial restrictions and allowing more people to go into unmanageable debt could be devastating.
Meanwhile, increasing the availability of commercial “build-to-rent” developments and social housing would make rentals more affordable, the inquiry has been told.
Advocates say build-to-rent offers tenants greater stability, with longer leases and less chance of the dwelling going up for sale or the investor deciding to live in it.
Social housing and build-to-rent are much less prevalent in Australia than comparable countries like the UK.
The Albanese government is trying to introduce tax incentives for the asset class to make it more competitive but has faced a roadblock in parliament, with the Coalition and Greens opposing it in the Senate.
With AAP
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